The Income Tax Department recently brought attention to an insightful post by Chartered Accountant (CA) Pradeep Goyal on X (formerly Twitter) that sheds light on how the current income tax scrutiny process works in India. The department highlighted the post as it reflects the growing transparency, accountability, and fairness in the income tax assessment system, especially under the faceless assessment regime.
What Did the CA Reveal About the Income Tax Scrutiny Process?
According to CA Pradeep Goyal, the scrutiny process today is far more structured, transparent, and taxpayer-friendly than ever before. Here’s what he explained in his post:
✅ Only a Small Percentage of Taxpayers Face Scrutiny: Scrutiny is conducted on a minuscule fraction of the total income tax returns (ITRs) filed every year. This means the majority of taxpayers don’t need to worry unnecessarily.
✅ Digital DIN-Based Notices to Prevent Fraud: All scrutiny notices are issued with a Document Identification Number (DIN). This unique number eliminates the possibility of fake notices used for harassment or blackmail. Taxpayers can verify the authenticity of these notices directly on the Income Tax portal.
✅ Two Types of Scrutiny Selections:
- CASS (Computer-Assisted Scrutiny Selection)
- Compulsory Scrutiny (which could be limited or full in nature)
✅ Limited Scrutiny in Most Cases: Most scrutiny cases today fall under limited scrutiny, where the tax officer is confined to reviewing only specific aspects of the return rather than conducting a complete assessment.
✅ Faceless and Corruption-Free Process: Scrutiny is conducted entirely through a faceless assessment system, leaving no room for bribery or personal harassment. The assessment is handled by designated assessment units, and the identity of the officers remains unknown to taxpayers.
✅ Draft Order Before Final Order: One of the key transparency measures is that the Income Tax Department issues a draft assessment order before finalising the scrutiny. This allows taxpayers to know the proposed additions or variations beforehand.
✅ Protection Against High-Pitched Assessments: If a taxpayer feels that the assessment is unfair or inflated, they can approach the High-Pitched Assessment Committee for relief.
CA Goyal also cautioned taxpayers, stating, “Do not pay money to anyone claiming to influence the assessment. The process is entirely digital and impartial.”
Can You Actually Know the Final Scrutiny Order Before It Is Issued?
Yes, thanks to the faceless assessment regime, taxpayers can effectively know the contents of the final scrutiny order before it is officially issued.
How?
The department is legally required to issue a draft assessment order or show-cause notice if they propose any variations that are adverse to the taxpayer’s interest. This provides an opportunity for taxpayers to present their side of the story before the final order is passed.
CA Tarun Kumar Madaan, a practising Chartered Accountant, explains:
“The faceless assessment system mandates issuing a draft order where proposed changes are prejudicial to the taxpayer. This ensures a fair chance to respond and upholds the principles of natural justice. Taxpayers can also request a personal hearing via video conferencing if required.”
However, he also pointed out certain practical challenges:
- Often, Assessing Officers (AOs) form a pre-decided view at the draft stage, which may lead to the final order being passed without fully considering the taxpayer’s objections.
- Such instances compel taxpayers to seek relief through appeals, increasing the burden on the already stretched Commissioner of Income Tax (Appeals) [CIT(A)].
- There’s also concern about last-minute issuance of draft orders or show-cause notices close to the statutory deadline, leaving little time for taxpayers to respond meaningfully.
Madaan emphasized the need for timely and continuous communication between the department and taxpayers throughout the assessment period, instead of waiting till the end.
What is Income Tax Scrutiny?
Income Tax Scrutiny refers to a detailed examination conducted by the Income Tax Department to verify the correctness of your income tax return. The department may issue a notice under:
- Section 143(2) for scrutiny selection, or
- Section 143(3) for a detailed assessment.
The primary objective of scrutiny is to ensure:
✔ Accuracy of income reported
✔ Legitimacy of deductions and exemptions claimed
✔ Correct tax payment as per law
Conclusion
The Income Tax Scrutiny process in India has evolved significantly with technology-driven transparency, faceless assessments, and strict safeguards for taxpayers. Though scrutiny can seem daunting, knowing that draft orders are issued before the final order gives taxpayers ample time to respond and defend their case.
Stay alert, verify notices through DIN, and never fall for scams demanding money in the name of tax officers. With awareness and timely action, you can navigate scrutiny assessments confidently and fairly.